PRELIMINARY ECONOMIC ANALYSIS OF BABARA JONES

Transcription

1 PRELIMINARY ECONOMIC ANALYSIS OF BABARA JONES Prepared For Fran Smith, Esq. 45 Handy Drive Syracuse, New York Prepared by Jim Clembox Bridge Street Oswego, New York April 28, 2008

2 Preliminary Economic Analysis: Barbara Jones Page: 1 Summary The total value for economic damages to Mr. Jones, as Executrix of the Estate of Barbara Jones, resulting from her death to work-life expectancy age 67 is $7,806,759. If her work-life was to age the total loss would be $5,936,321. The present value is $4,502,957and $3,820,197 respectively. Introduction This analysis assesses the economic contribution made to Mr. Jones, individually and as Executrix for the estate of Barbara Jones by the decedent Barbara Jones. The pecuniary loss (See Table 1) in this matter consists of Ms. Jones's expected earning capacity (See Table 2). Added to this is the value of her lost household services (See Table 3). Funeral expenses are also added to the economic damages. The total economic loss to the Estate of Ms. Jones as a result of her death is between $7,806,759 (Present Value $4,502,957) to work-life to age 67 and $5,936,321 (Present Value $3,820,197) to work-life This report is based on information provided by plaintiff's counsel, the plaintiff, multiple year tax returns, as well as by various governmental and professional publications. Background Barbara Jones. was born July 30, 1944 ( ) and died on May 21, 2003 ( ) at age At the time of her death, the decedent was employed. She also provided household services to her spouse at the time of death. Mr. Jones s life expectancy as of the day of her death was 21.7 years 1 (to age 80.51). Her work-life expectancy (assuming she was an average female worker with a college degree) is to age 67 (7.24 more years) or to age (xxxsnumber of years). 2 Work-life expectancy takes into consideration exiting and entering the labor market for various reasons. This report does not take working past age 67 into consideration. If the trier of fact determines that worklife continues beyond age 67, the loss of earning capacity will be larger. Tables 2 show yearly losses until age 67. Mr. Jones s life expectancy as of the day his wife died was to age ( ). 1 National Vital Statistics Report, Vol. 52, No. 14, February 18, 2004, Table 2, Department of Health and Human Services, Centers for Disease Control and Prevention. 2 James Ciecka, Thomas Donley and Jerry Goldman: A Markov Process Model of Work-Life Expectancies Based on Labor Market Activity in Journal of Legal Economics, Winter , pp This paper updates with recent data the older worklife expectancy estimates found in U.S. Department of Labor, Bureau of Labor Statistics, "Worklife Estimates: Effects of Race and Education," Bulletin 2254, (Feb. 1986) which are used in NYPJI.

3 Preliminary Economic Analysis: Barbara Jones Page: 2 CALCULATIONS OF LOST WAGES Base Year Earnings for Loss Earning Capacity of Barbara Jones At the time of her death, Mrs. Jones was employed as a (put occupation). Her average earnings for the last (number of years) years as a (occupation) was $97,500. PRESENT VALUE Present value asks the question, what would the total economic loss in the future be worth today? Keep in mind that one dollar today will be worth more in the future because it earns interest. Present value does just the opposite by asking how much is one future dollar worth today. This is accomplished by discounting the total economic loss. The discount rate for lost earnings is based on a ten year US. Government Treasury Constant Maturities as of April 23, 2008 which is XXX percent. 3 Growth rate It is assumed that Mr. Jones's earnings, would keep pace with the (what ever you used here CPI, employment cost index or past wages) consumer price index. 4 The actual CPI annual growth was used for past losses while the average historical growth of the CPI (xxxx percent) was used for future growth rates. The growth rate is xxx%. Self-Consumption In wrongful death cases, a deduction must be made for the amount of income the deceased would have used for her personal consumption. For example, a percent of Ms. Jones s future income would have been used for her own benefit for such things as food, clothing, and medical care. After her death, Mrs. Jones no longer has to incur these expenses. The percent of Mrs. Jones s future earnings that went for personal consumption is deducted from the losses to the estate as a result of her death. It is necessary to determine the appropriate percent deduction for the personal consumption component of the deceased. Her earnings were $97,500. This amount is used to determine Ms. Jones self-consumption percentage. Ruble, Patton and Nelson 5 tabulate the incremental consumption cost percentage for females in a two-person, three and four person family to be xx, xx, and xxxx percent. Each loss in this analysis makes the necessary deductions for personal consumption. 3 These can be found in Federal Reserve Statistical Release located at The Laddered interest rates are based on 1, 2, 3, 5, 7, 10, 20 and 30 year Treasury Constant Maturities. 4 See 5 Michael Ruble, Robert Patton and David Nelson, 2004, Patton-Nelson Personal Consumption Tables : Updated and revised, Journal of Forensic Economics 15(3), 2002, pp , Table 3.

4 Preliminary Economic Analysis: Barbara Jones Page: 3 Funeral and other Death Related Expenses Funeral expenses for Mr. Jones were $7,000. This is a loss to Mrs. Jones and is shown in Table 1. LOST HOUSEHOLD PRODUCTION Lost household production considers those activities that are performed outside the paid marketplace, which have pecuniary values that can be estimated. As such, lost household production should be included in damage awards. An individual's contribution to household production is defined as the cumulative value of the various economic services produced. Mr. Jones provides a foundation (through a household survey instrument) that Ms. Jones performed xx hours of household services per week prior to her death while working as a (occupation). This is consistent (higher) with national data provided by the study, The Dollar Value of a Day (2006). 6 This study attaches an hourly monetary valuation of all the activities for Household Production. Table 3 Column A shows the value of household services to be $744,949. The present value is $453,723. Adjustments to account for more hours of household services upon Mr. Jones retiring are made as well as deducting personal consumption. It is important to note that there was the necessary percent reduction for self-consumption. If the trier of fact determines that household services provided by the deceased cannot be split (that is, only 81.9 percent of the lawn can be mowed) then this amount can be increased by those percentages. Mr. Jones should be able to replace the household services of his deceased wife while he is living. Upon the end of her life expectancy in the year xxx there would be no loss to Mrs. Jones for household services. Table 3 shows that the total loss of household services is $744,949 (PV of $453,723). Analysis Table 2 shows Mr. Jones s lost earning capacity based on her reported social security income levels. Losses are presented to her work-life expectancy to age 67 and Added to this is Fringe Benefits (Column B) and subtracted is taxes self-consumption expenditures (Columns C and D). The cumulative lost earning capacity for Barbara Jones. is $7,054,811 (work-life expectancy to age 67) or $5,184,373 to work life The present value is $4,042,234 and $3,359,474 respectively. Table 3 shows what the loss of household services would be if Mr. Jones could replace his wife s household services at the prevailing market wage rate. Since Mr. Jones s life expectancy (year ) occurs after Mr. Jones's healthy life expectancy (year ), the loss of household services stops upon her healthy life expectancy. That loss is $744,949 after deducting her selfconsumption percentage. The present value is $453,723. Household service is added to the lost earning capacity of Ms. Jones. 6 Expectancy Data, The Dollar Value of a Day: 2004 Dollar Valuation. Shawnee Mission, Kansas, 2006.

5 Preliminary Economic Analysis: Barbara Jones Page: 4 Funeral expenses of $7,000 are added to the loss. The total value for economic damages to the Estate of Barbara Jones resulting from her death to work-life expectancy age 67 is $7,806,759 (PV $4,502,957). If work-life was to the loss would be $5,936,321 (PV $3,820,197). This loss does not consider pain and suffering, grief, sorrow, mental anguish or loss of consortium. It also does not include loss of guidance and council to Mr. Jones adult children. This analysis is based on the documentation and information available to date. I reserve the right to update this analysis and report if additional relevant information is provided, upon your request.

6 Preliminary Economic Analysis: Barbara Jones Page: 5 Table 1 Summary of Economic Damages Barbara Jones Total Present Value Lost Earnings to age wle $5,184,373 $3,359,474 to full soc sec 67 $7,054,811 $4,042,234 Lost household services $744,949 $453,723 Funeral expenses $7,000 $7,000 Total Losses to age wle $5,936,321 $3,820,197 to full social security 67 $7,806,759 $4,502,957

7 Preliminary Economic Analysis: Barbara Jones Page: 6 TABLE 2 Barbara Jones Year Age (A) (B) (C) (D) E=A+B-C-D Lost Fringe Benefits Minus Minus Total Loss Total Loss Cumulative Cumulative Earnings Taxes PCA WLE age WLE age $26,280 $5,782 $5,519 $3,521 $23,021 $23,021 $23,021 $23, $103,311 $22,728 $21,695 $13,844 $90,500 $90,500 $113,521 $113, $109,468 $24,083 $22,988 $14,669 $95,894 $95,894 $209,416 $209, $115,993 $25,518 $24,358 $15,543 $101,610 $101,610 $311,025 $311, $122,906 $27,039 $25,810 $16,469 $107,665 $107,665 $418,691 $418, $130,231 $28,651 $27,349 $17,451 $114,082 $114,082 $532,773 $532, $137,993 $30,358 $28,978 $18,491 $120,882 $120,882 $653,655 $653, $146,217 $32,168 $30,706 $19,593 $128,086 $128,086 $781,741 $781, $154,932 $34,085 $32,536 $20,761 $135,720 $135,720 $917,461 $917, $164,166 $36,116 $34,475 $25,282 $140,526 $140,526 $1,057,987 $1,057, $173,950 $38,269 $36,529 $26,788 $148,901 $148,901 $1,206,888 $1,206, $184,317 $40,550 $38,707 $28,385 $157,776 $157,776 $1,364,664 $1,364, $195,303 $42,967 $41,014 $35,154 $162,101 $162,101 $1,526,765 $1,526, $206,943 $45,527 $43,458 $37,250 $171,762 $171,762 $1,698,527 $1,698, $219,276 $48,241 $46,048 $39,470 $181,999 $181,999 $1,880,527 $1,880, $232,345 $51,116 $48,793 $41,822 $192,847 $192,847 $2,073,373 $2,073, $246,193 $54,162 $51,701 $44,315 $204,340 $204,340 $2,277,713 $2,277, $260,866 $57,391 $54,782 $46,956 $216,519 $216,519 $2,494,232 $2,494, $276,414 $60,811 $58,047 $49,754 $229,423 $229,423 $2,723,656 $2,723, $292,888 $64,435 $61,506 $52,720 $243,097 $243,097 $2,966,753 $2,966, $310,344 $68,276 $65,172 $55,862 $257,586 $257,586 $3,224,338 $3,224, $328,841 $72,345 $69,057 $59,191 $272,938 $272,938 $3,497,276 $3,497, $348,440 $76,657 $73,172 $62,719 $289,205 $289,205 $3,786,481 $3,786, $369,207 $81,225 $77,533 $66,457 $306,441 $306,441 $4,092,923 $4,092, $391,211 $86,066 $82,154 $70,418 $324,705 $324,705 $4,417,628 $4,417, $414,528 $91,196 $87,051 $74,615 $344,058 $344,058 $4,761,686 $4,761, $439,233 $96,631 $92,239 $79,062 $364,564 $364,564 $5,126,250 $5,126, $465,412 $102,391 $97,736 $83,774 $386,292 $58,123 $5,184,373 $5,512, $493,150 $108,493 $103,562 $88,767 $409,315 $5,921, $522,542 $114,959 $109,734 $94,058 $433,710 $6,355, $553,685 $121,811 $116,274 $99,663 $459,559 $6,815, $288,778 $63,531 $60,643 $51,980 $239,686 $7,054,811 Total $8,425,362 $1,853,580 $1,769,326 $1,454,805 7,054,811 5,184,373 Loss to age 67 $7,054,811 Present Value $4,042, $5,184,373 $3,359,474

8 Preliminary Economic Analysis: Barbara Jones Page: 7 TABLE 3 Household Services Year Age HHS PPC Total Cumulative $3,949 $529 $3,420 $3, $15,120 $2,026 $13,094 $16, $15,604 $2,091 $13,513 $30, $16,104 $2,158 $13,946 $43, $16,620 $2,227 $14,393 $58, $17,152 $2,298 $14,854 $73, $17,701 $2,372 $15,329 $88, $18,268 $2,448 $15,820 $104, $18,853 $2,526 $16,327 $120, $15,831 $2,438 $13,393 $134, $16,338 $2,516 $13,822 $147, $16,861 $2,597 $14,265 $162, $15,946 $2,870 $13,076 $175, $16,457 $2,962 $13,494 $188, $16,984 $3,057 $13,927 $202, $17,527 $3,155 $14,373 $217, $18,089 $3,256 $14,833 $231, $18,668 $3,360 $15,308 $247, $19,266 $3,468 $15,798 $262, $19,883 $3,579 $16,304 $279, $20,519 $3,694 $16,826 $296, $21,177 $3,812 $17,365 $313, $21,855 $3,934 $17,921 $331, $22,555 $4,060 $18,495 $349, $23,277 $4,190 $19,087 $368, $24,022 $4,324 $19,698 $388, $24,791 $4,462 $20,329 $409, $25,585 $4,605 $20,980 $429, $26,405 $4,753 $21,652 $451, $27,250 $4,905 $22,345 $473, $28,123 $5,062 $23,061 $497, $29,023 $5,224 $23,799 $520, $29,953 $5,391 $24,561 $545, $30,912 $5,564 $25,348 $570, $31,902 $5,742 $26,159 $596, $32,923 $5,926 $26,997 $623, $33,978 $6,116 $27,862 $651, $35,066 $6,312 $28,754 $680, $36,189 $6,514 $29,675 $710, $37,347 $6,723 $30,625 $740, $5,029 $905 $4,123 $744,949 Totals $899,101 $154,152 $744,949 Present Value $453,723